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This week, the SEC settled with JP Morgan
Chase. And we, the taxpayers - more aptly known as their
oxygen supply - have nothing much to show for it.

The bank agreed to fork over a paltry $153.6 million to the
government to settle civil charges that "...it misled investors
in a complex mortgage-bond" deal. Its sin was a failure to
disclose to these investors that a hedge fund helped to construct
the portfolio it sold, and that it "stood to profit" if the debt
instruments cratered.

The deal was for over a billion dollars. But the settlement
was so tiny that JP Morgan's reserves were able to absorb it, and
there will be no impact on second-quarter earnings.

Goldman Sachs made a similar settlement with the SEC for their
ill-fated "Abacus" fund. Their penalty was $550 million. And like
JP Morgan, Goldman neither "admitted nor denied wrong-doing"
although Lloyd Blankfein admitted to "making mistakes."

In announcing the settlement, JP Morgan was positively - and
understandably - chirpy about the salutary outcome, noting
proudly that they "weren't charged with intentional or reckless
misconduct."

The deal in question was called Squared CDO 2007-1. Investors
lost it all, the hedge fund made a "windfall," and JP Morgan
pocketed around $19 million for its efforts in gift-wrapping the
garbage in a shiny box.

The SEC's behavior has been spineless. Both Goldman's and
JP Morgan's actions rose to - and met - the level of
"wrong-doing" and they were let off the hook by a compliant bunch
of regulators who desperately needed to teach a lesson, not give
a hall pass.

How could withholding information about the fact that JP Morgan
worked with a hedge fund to package their junk NOT be
intentional? Or - put even more convincingly - how could
this have happened unintentionally? What about it wasn't reckless
- given both the bank's awareness of the content of the CDO, and
the consequences of its actions?

The American people need strong, gutsy regulators. (I write this
as the Obama administration continues to have a backbone of
custard in the Congressional fight over the appointment of
Elizabeth Warren to run the new Consumer Protection Agency.)

Far more than JP Morgan's lousy $153 million, we need to see
those responsible for the financial crisis get more than a slap
on the wrist. Some should face criminal charges, and a Prada perp
walk. And the institutions themselves should be forced to admit -
as part of any settlement - that more than mistakes were
made. Intentional misconduct - much of it reckless - was an
everyday fact of life.

Wall Street's systemic corruption has never been adequately
recognized, punished and resolved. The Financial Inquiry
Commission was tougher in its language than the enforcement
response. Big deal, small comfort - someone can point
to strong words on a page. But such fulminations, published years
later and largely ignored beyond a single news cycle - are
useless husks. And the contrast between those words and
business-as-usual on Wall Street is another tranche (to use one
of their favorite words) of frustration.

Without the public declaration that the SEC failed to insist
upon, Goldman, JP Morgan and others will forever be able to hide
behind the protective, weasely cover of "we didn't admit any
wrong-doing - and the government agreed."

That's bad for America, bad for history, and bad for the culture
of Wall Street. Jamie Dimon recently scolded Ben Bernanke for the
increased capital requirements that Dodd-Frank is putting on
banks, claiming they are suppressing lending, and arguing against
the 3% increase (from 7% to 10%) for so-called SiFis
(Systemtically Important Financial Institutions.)

Do you think that if JP Morgan and Goldman Sachs had not been
permitted to deny wrong-doing, these institutions would be so
shameless in advocating against modest increases in their capital
requirements? Their freedom to complain says everything.

After all, it wasn't that long ago when they rushed frantically
to the discount window - opened to non-banks for the first time
in more than half a century - because their "non-reckless"
actions had nearly bankrupted the global financial system. Wall
Street wants us to forget that, and the SEC is helping them
create the forgiving amnesia.

The reforms that came about as a result of the Great Depression
really changed things. The creation of the SEC itself,
Glass-Steagal, these were game-changers that created a regulatory
framework that lasted for generations.

Sadly, the worst financial crisis since the Depression will leave
no such lasting legacy. We've refused to use bold and muscular
enforcement, and whatever new meaningful regulatory mechanisms
that were included in the general language of Dodd-Frank are
being challenged or simply eviscerated in the rule-making
process.

We've let the fox return to the hen-house, smug and emboldened,
and have given the hens nothing to defend themselves, other than
some limp fox-protection promises and a shot gun with no
bullets.

The public knows something is wrong. They know it, live it, and
watch it every day in the morally indefensible chasm that
continues to separate the unemployment and foreclosure numbers -
and the health of small business - from buoyant bank profits.
This profound and visceral ooze of dissatisfaction, the repressed
fury at the power fraternity that is still seen as running the
country - which is lodged deep in the wounded psyches of
Republicans, Democrats and Independents, is what's behind Obama's
treacherous poll numbers. That shared climate of betrayal
is what defines the real post-partisan
America.

"Without admission of wrong-doing" is a startling but not
unexpected example of regulatory incompetence and flaccidity.
It reminds me of what my wife Flora has always said about
all this: "It's a matter of the crooks versus the schnooks."